No Need for Trans-Atlantic Trade Deal to Be an Ocean Away

Feb. 11 (Bloomberg) -- European Union leaders announced
last week their intent to pursue negotiations with the U.S. over
a free-trade agreement. President Barack Obama should
reciprocate.

Over the past year, the idea of a Trans-Atlantic Free Trade
Agreement has taken on mythical attributes: It’s an enticement
for the U.K. to remain in the EU, a prod to resume dormant
global trade talks and a counterweight to a rising China.

It would be nice if TAFTA led to all that. For now, though,
it should be motivation enough that an expansion of trade
between the U.S. and the 27 countries of the EU would be a cost-free stimulus to create jobs and increase growth on both sides.

Such an agreement has powerful supporters, including German
Chancellor Angela Merkel and U.K. Prime Minister David Cameron,
along with business groups and labor leaders. Vice President Joe
Biden lauded it when he swept through Europe this month.

At $5 trillion annually, the U.S. and Europe already have
the biggest trading relationship in the world, accounting for
almost one-third of all commerce and more than half of global
gross domestic product. Even so, there is ample room for this
trade to grow. Zeroing out the remaining tariffs on both sides
would increase trade by more than $120 billion within five years
and generate combined GDP gains of about $180 billion, according
to a study by the U.S. Chamber of Commerce.

Regulatory Barriers

There is even more to be gained by smoothing out regulatory
differences that restrict trade under the guise of consumer-protection, environmental or health concerns. A study ordered by
the European Commission showed that eliminating half of these
so-called nontariff barriers would increase GDP by 0.7 percent
in the EU and 0.3 percent in the U.S.

Yet for all the obvious benefits, the U.S. so far hasn’t
promised to come to the table. The fear is that lengthy
negotiations will collapse over the same handful of stubborn
issues that have scuttled similar attempts over the past 20
years.

The U.S. shouldn’t be so cagey. For one thing, its trade
officials have spent the last year in quiet talks to ensure that
previously fatal disputes -- the EU’s near-ban on genetically
modified foods, say, or the U.S.’s limits on foreign ownership
of airlines -- could be overcome this time around. Some
confidence-building measures have already been announced. The EU
said recently that it would lift a ban on some sanitary
treatments for beef; the U.S. moved to end some import
restrictions on avocados and apricots from Spain.

Another reason for optimism is the decision to structure
the talks in a more effective way: Instead of a sector-by-sector
approach, the two sides are striving for a comprehensive deal in
which a concession by the EU on agriculture could be matched by
a U.S. concession on government contracts.

For both sides, the negotiations will come down to a
handful of demands. Among the U.S. must-haves: better access to
the EU for agricultural products and more harmonization of
regulations and standards. One reasonable solution would be to
agree to disagree: Each side could accept the other’s sanitary
and health requirements for agricultural products, for example,
even when they are different. This would apply the principle of
mutual recognition, which was pivotal in building the EU itself.
The Europeans could also help by allowing U.S. companies more
input on EU market regulations.

State Contracts

The EU’s wish list includes greater ability to sell goods
and services to U.S. governments, especially at the state level.
Much of the groundwork has been laid: The federal government has
already obtained commitments from 37 states to open their
procurement markets, with the promise that a comprehensive trade
deal would give local industries and products greater access to
EU markets. It should be possible to rope in the 13 holdout
states.

Another longstanding EU demand is the easing of
restrictions on foreign ownership of U.S. airlines and
management of airport operations, along with the easing or
repeal of the Jones Act, a post-World War I law that bars
foreign ships from carrying freight between U.S. ports. These
are reasonable demands.

The EU also wants better protection under U.S. law for so-called geographic indicators, the trademarked designation of
products such as Serrano ham or Gouda cheese. A solution would
be to require U.S. producers of grated Parmesan, for example, to
clearly label their products as distinct from cheese that is
made in Parma, Italy.

Yes, we understand the U.S. desire to avoid protracted
negotiations that collapse over mold on Roquefort cheese or the
use of Ractopamine, a drug treatment, by U.S. meat producers.

Still, as Biden said Feb. 2 at a conference in Munich:
“This is within our reach.” For a trans-Atlantic trade pact, it
should come as a relief that the parties concerned are no longer
oceans apart.